HodgkinsonBuild: Are you seeing the detrimental effects of soaring ...

HodgkinsonBuild: Are you seeing the detrimental effects of soaring ...:   Andrea Fawell, sales and marketing director of WhatHouse? Award-winning property developers Kebbell, reveals what market factors are likel...

Are you seeing the detrimental effects of soaring mortgage rates and reduced mortgage offers in terms of a house price downturn?

 Andrea Fawell, sales and marketing director of WhatHouse? Award-winning property developers Kebbell, reveals what market factors are likely to affect house buyers and developers in 2023 and how confidence in the market is right now.

Are you seeing the detrimental effects of soaring mortgage rates and reduced mortgage offers in terms of a house price downturn?

Developers nationwide are feeling the pinch of buyers showing interest or agreeing on terms but then putting the purchase on hold because of raised mortgage rates. Interestingly at our biggest development, Cornelian Fields in Scarborough, buyers are still buoyant and are continuing to want to live by the sea in a good quality home and are prepared to absorb the changes. Everything is taking a bit longer and mortgages are having to be renegotiated so lenders are causing delays. I do think things will level out soon simply because there will always be demand because of the shortage of homes.

How are viewing numbers and client confidence? 

Confidence is not great and there is a lot of waiting and seeing at the moment. The impact of Liz Truss’s mini-budget will have a long-term effect. This is really a reflection of how important the property market is and how it is used as a barometer. However, I believe most developers are seeing good visitor levels, especially in areas where there is always demand, but there may be more compromising to be done. The new stamp duty land tax hasn’t made a significant difference but there are savings on stamp duty and every little helps.

What trends are you seeing at the moment and what are your predictions for 2023? 

There are so many market changes and influences, so I am going to break them down. Firstly, the cost of living crisis is making developers look at ways to make energy reductions and savings to meet consumer demand by building more energy-efficient homes. Whether that be through new appliances, better insulation, underfloor heating and modern building materials, or by improving annual ‘core’ energy costs for heating, lighting and hot water. Some mortgage lenders are offering ‘green mortgages’ which give better interest rates and sometimes cashback for energy-efficient homes, and in the not-too-distant future homebuyers may be willing to pay more for a property which uses renewable energy.

Next is availability and cost of materials. The industry as a whole was hit hard by material shortages throughout 2021. While the general availability of materials is improving, some materials such as bricks, aerated blocks and kitchen appliances using microchips, continue to be problematic and on long lead times. Current influential market factors are high energy prices, boiler upgrade schemes, the shortage of microchips, VAT reduction from 5% to 0%, Brexit, not having fully recovered from Covid, the war in Ukraine and changing building regulations to name but a few. Planning is key and for example, Kebbell has already put in our orders to brick-and-block manufacturers to ensure continuity of supply to the end of 2023. The biggest constraint is however now cost as inflation is over 10%.

With regards to availability and price of labour, there seems to be labour available but not necessarily the standard and the skill that is required which may delay the build programme. The cost of labour has risen over the last few years and I expect it to continue rising as the demand is there and companies can charge higher rates as they know they are sought after. Some of our subcontractors are investing in further training and courses for staff, such as upskilling because there will also be a catch-up process with labour as we see the decline in using gas as the main source of heating, given there are lots of boiler engineers, but not that many air source heat pump installers.

Building regulation changes mean that since 15 June 2022, all new homes must now produce 30% less carbon dioxide emissions than current standards. The building regulations also include new standards to reduce energy use and carbon emissions during home improvements. Contractors again need to invest in new skills within their workforce to keep up with future changes in sustainability.

The land market has been affected by the recent political turmoil and uncertainty in the market; a lot of deals fell through and are back on the market presenting new opportunities. Luckily Kebbell is well-placed to secure deals at the correct level. Demand remains high and whilst we don’t expect land values to fall, the premium over the actual value that was being paid has tempered, although build cost inflation continues to be a concern. We anticipate an uptick in the availability of land as a result of the turmoil as some landowners are liquidating their assets, but there is still a functional lack of land, and constraints of the planning system and a shortage of planning staff remain a constant challenge.”

How important will environmental, social, and governance be to the industry in 2023? 

Developers are more conscious of the necessity to care about more than just the bottom line. For example, compliance with the Modern Slavery Act is increasingly being taken into consideration and we are seeing many smaller companies who do not have to comply with the Act providing a statement. Air miles generated are a consideration but as most materials have to be imported it is not always top of the list. Sustainability is far more central to decisions and plans than ever.

How much of a part do sustainability issues impact developers’ decisions? 

The new build industry as a whole, and Kebbell specifically, has responded well to European Environmental Protection Legislation and sustainability challenges, however as new build homes make up less than 1% of the housing stock annually, the impact is fairly limited. At Kebbell, we have a number of major initiatives planned and on the go, as part of our new sustainable drive including choosing contractors who have policies on waste, materials and transport that align with ours. What we also need, as a country, is for our 25m homeowners to also be more engaged in sustainability and biodiversity so a more significant impact could be had.

What are you seeing as home buyers’ must-haves for 2023? 

The memory of the summer we just had ironically means requests for more air conditioners in bedrooms, and we have had a surprising number of requests for drought-resistant turf! Climate change is an incredibly important part of the mix now. Air source heat pumps, electric car chargers and water meters are now being frequently requested. Good computer hardwiring for the house is a must so that multiple people can be online at the same time for gaming, working from home and online life and so we are not so reliant on routers and boosters. Buyers now request TV points in bedrooms with hard wires and excellent broadband speed and reliability need to come as standard across all age groups in all regions. Whilst there was a boom in demand for open space and work-from-home offices in 2020-2022, this is now commonly viewed as an expected part of normal life now.

Should you wait until after Christmas to buy a house? As buying chains break, everything is taking longer to sell and prices are starting to fall

 Should you wait until after Christmas to buy a house?

As buying chains break, everything is taking longer to sell and prices are starting to fall

Winter has arrived with a cold blast in the property market with the news that the average house price dropped by 2.3 per cent (£6,827) last month — the largest decrease since October 2008 and the third consecutive monthly fall, according to Halifax.

The enormous price increases of the pandemic — 19 per cent (£46,403) since March 2020 — have certainly vanished, and while everyone expected a slow chill to descend, being plunged into the deep freeze wasn’t on the agenda. But both buyers and sellers have taken fright since September’s mini-budget pushed fixed mortgage rates up by two percentage points.

“While mortgage rates have fallen back somewhat in recent weeks, they remain too high for demand to recover and prices to bottom out any time soon,” according to Andrew Wishart, the senior property economist at the Capital Economics consultancy. “The 2022-23 house price correction has begun far more abruptly than that in 1989-90 or 2007-08, reflecting the sheer scale and pace of the mortgage rate shock.”

In the wake of the mini-budget more than 1,000 fixed-rate mortgages were withdrawn by lenders as rates rose — tipping 6 per cent for a two-year or five-year fixed rate. Since then some lenders have reduced rates slightly, yet given that it is expected that the Bank of England will raise interest rates from 3 per cent to 4.5 per cent over the coming months, it’s no wonder buyers are hunkering down.

“Some potential home moves have been paused as homebuyers feel increased pressure on affordability, and industry data continues to suggest that many buyers and sellers are taking stock while the market continues to stabilise,” says Kim Kinnaird, director of Halifax Mortgages.

Wishart adds: “Some combination of lower prices, lower mortgage rates and higher pay is needed to make buying a house more affordable again, and to allow demand to recover and prices to bottom out. The sharp fall in house prices in November raises the risk house prices adjust before there is a material drop back in mortgage

Those surveyors and estate agents interviewed for the Rics residential survey published this week have also noticed the change in temperature, with buyer demand, agreed sales and new seller instructions all down. Colin Townsend from John Goodwin agency in Malvern, Worcestershire, summed it up: “Definitely signs that the troubles in the economy are now impacting sales in the housing market. Many more chains are breaking, everything is taking longer to sell and prices are starting to fall. More challenging times lie ahead.”

The time it takes to sell has increased by 25 days in the past year in “middle-income areas”, according to Hamptons estate agency, with sellers and buyers locked in a stand-off as sellers, and some estate agents, fail to readjust to the lower demand and the negotiating power of buyers.

“People are now making offers as low as possible to get the best deal. Unfortunately, I can’t see much activity in December. However, estate agents will need to polish their negotiating skills for January as many buyers will offer 15 per cent lower than the asking price. By then sellers will be seriously re-evaluating how much their house is worth in the market,” says Zaid Patel, a director at Highcastle Estates, an estate agency based in London.

The true extent of the damage may not be apparent until March, when traditionally the spring market begins. Tom Bill, head of residential research at Knight Frank, says: “For some buyers, the clock is ticking because they are sitting on time-limited mortgage offers that predate the mini-budget. They will want to move as quickly as possible, and sellers may find the scope for price negotiations is more limited. In other instances, the complete reverse is true. While demand hasn’t disappeared, offers are not necessarily as forthcoming as they were six months ago due to the volatility in the mortgage market. This mixed picture is further confused by the arrival of the Christmas break.”

He adds: “I expect more clarity around the trajectory for house prices from March next year. The spring selling season will shine a more intense spotlight on the housing market when mortgage rates will have settled and the price expectations of sellers will be fully put to the test. That could be a ‘wake up and smell the coffee’ moment.”

Samuel Mather-Holgate of Mather & Murray Financial, a brokerage, adds: “Transaction levels will dry up faster than a bar during the England v France match this weekend as the next six months see a battle of the wills between sellers trying to get what they think their property is worth and buyers realising a catastrophic crash is on the horizon. By spring we should see prices 20 per cent lower and [mortgage] rates starting to come down. Then it will be a buyers’ market as the doors reopen to trade.”

This five-bedroom cottage in Sturminster Newton, Dorset, is on sale for £975,000 with Savills

So it would make sense for sellers to try and sell now, and for buyers to wait until at least the spring. Until then the picture is more mixed than the headlines might suggest, with places slowing down at different rates. For instance, according to the Halifax data, house prices continue to rise in the North East of England where annual house price inflation is 10.5 per cent. In fact, in 92 per cent of British postcodes it is still officially a sellers’ market, and in 50 per cent of locations an extreme one. Only 177 postcodes (8 per cent) are now officially buyers’ markets, according to data on buyer demand and sales subject to contract from PropCast, property data analysts.

There are some locations that have been hot sellers’ markets for the past year and remain so: “Bristol is the greatest place on earth according to the data, and it is still going very strong,” says Gavin Brazg, the head of PropCast. Meanwhile, other neighbourhoods have remained buyers’ markets throughout the pandemic and beyond, including prime southwest London hotspots such as Kensington, Chelsea and

Those that have flipped from sellers’ to buyers’ markets already include some of locations that were the most desirable and flew highest during the pandemic — including much of Wales and the South West. Take the postcode TQ5, Brixham, on the south Devon coast: it was an extreme sellers’ market in 2021 as buyers rushed to coastal and country hotspots, but by September this year sentiment had started to turn and demand cool; now it is definitely a buyers’ market.

Almost uniformally, economist and property price forecasters expect house prices to continue falling — the question is, by how far and for how long? “Increasingly, our forecast of a 12 per cent peak-to-trough fall in house prices feels like it is towards the more optimistic end of the spectrum of possible outcomes,” Wishart says. Last month Nationwide’s chief financial officer Chris Rhodes told MPs his “worst-case” scenario was a 30 per cent drop in prices, with an 8 per cent to 10 per cent fall more likely. It could be a long, cold winter for some people. 

COVID-19: Councils call for 100,000 social homes a year to aid recovery

COVID-19: Councils call for 100,000 social homes a year to aid recovery

The Local Government Association (LGA) has called for councils to be given the powers to build thousands of ‘desperately needed’ council homes to ‘spearhead’ the recovery from COVID-19.

Post-pandemic, 100,000 affordable homes are needed to provide housing for key workers and the families of those who lost their lives to the virus. This would also address the downturn in construction because of the virus as housebuilders closed their sites, the LGA argues. 

Such a programme would also benefit the economy, help the government to achieve its target to deliver 300,000 homes a year by the mid-2020s, and alleviate pressures on health and social care that result from poor housing conditions, according to the LGA.

Delivery of Council Housing – Developing a Stimulus Package Post-Pandemic sets out the key issues and recommendations for the government to deliver a social housebuilding programme. 

These include:

• Council housing delivery should be expanded by bringing forward and increasing the £12 billion extension of the Affordable Homes Programme announced in the 2020 Budget, with an increased focus on social rent homes.
• Right to Buy should be reformed – councils should be able to retain 100 per cent of receipts from the sale of homes under the scheme. The deadline by which the money from sales is spent should be extended to at least five years, and councils should be given the power to set the size of discounts locally.
• A skills and jobs strategy is required to increase capacity in the building industry to help to accelerate a social housing building programme.

David Renard, housing spokesman for the LGA, said: “As the nation comes through the biggest crisis we have faced since the Second World War, we owe it to the health, care and other essential public service workers, who have risked their lives to keep the country running to provide them with affordable, high-quality homes fit for heroes.

“The government should let councils take charge of the housing recovery, by giving them the powers and tools to build more of the affordable homes the country desperately needs.

“A programme of 100,000 social homes a year would not only meet a third of the government’s housebuilding target, but it would generate a range of social and economic benefits.

“Now is the time for a genuine renaissance in council housebuilding that reduces homelessness, gets people off the streets for good, supports people’s wellbeing and is climate-friendly.”

Delivery of Council Housing – Developing a Stimulus Package Post-Pandemic can be found on the LGA website (pdf).

22 June 2020
Laura Edgar, The Planner

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Hodgkinson - International Bricklayer Contractors

Hodgkinson - International Bricklayer Contractors

200,00 new homes is great Mr Cameron but who is going to build them?

200,00 new homes is great Mr Cameron but who is going to build them?

In the run up to National Apprenticeship Week (March 9th-13th), the boss of a Derby building firm welcomes yesterday’s (March 2nd) pledge by the Tory leader to build 200,000 new homes for first time buyers. However, he also claims that without a more holistic approach to apprenticeships, we cannot hope to have the skills to build them.  

Ian Hodgkinson, managing director of Hodgkinson Builders on Pride Park, who employs over 100 bricklayers said:

“There were two announcements yesterday which I found frustrating and hugely encouraging. Firstly, David Cameron’s pledge will be welcomed by those of us in the trade as it means jobs and growth. However, I really do worry that we haven’t go the required skills-base in this country’s labour force to deliver these projects - it’s a legacy from the recession.

“During the downturn, instead of putting out fires, we should have been preparing for the upturn. The Government should have been investing in training young people in readiness for the market picking up again - just as Mr Cameron is now promising with these houses.”

“However, at the same time, I echo yesterday’s announcement by the British Chambers of Commerce, who published the BCC Workforce Survey, Developing the Talents of the Next Generation.

“This noted that ‘57% of employers cite a lack of soft skills such as communication, resilience and team working, as the main reason why young people are unprepared for the world of work.”

“This is just as much an issue in construction as it is across the UK labour force. If we are to develop the stars of the future for our industry it isn’t just about the ability to lay bricks or erect scaffolding. There are softer skills that need to be mastered, be they punctuality, courtesy, confidence or even driving. It is little use hiring young apprentices if they can’t get to site and even worse when they don’t necessarily see the impact that tardiness or a perceived lack of respect can have on their employer and ultimately, their career.

“I’m sure this will be the case across many industries but I will concentrate on my own and to that end, I am already exploring the possibilities of linking up with education providers to create a holistic approach to training apprentices.

“There is a real opportunity to be grasped, let’s just hope our future stars can take advantage of it.”

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